Moody's Investors Service said it has downgraded the village of Rosemont, Ill.'s general obligation rating to A2 from A1.
Concurrently, Moody's has assigned an A2 rating to the village's $25.0 million general obligation corporate purpose refunding bonds, taxable, Series 2013A and $4.5 million general obligation corporate purpose refunding bonds, tax-exempt, Series 2013B. Post-sale, the village will have $371.5 million of long term general obligation unlimited tax debt outstanding. The village's outlook remains negative.
The Series 2013A and Series 2013B bonds are secured by the village's general obligation unlimited tax pledge. Proceeds of the bonds will refund the village's general obligation bonds Series 2003B and tax increment revenue bonds Series 2007, respectively. The purpose of both refunding issuances is to generate cash flow savings.
The downgrade of the village's general obligation rating to A2 from A1 is based on ongoing declines in village's tax base valuations, which have led to an over 40% reduction in its valuation since 2008, along with continued general fund support for a number of economically-sensitive enterprise operations.
The rating also reflects the village's substantially elevated debt burden, which is the highest among Moody's rated cities, villages and towns; along with its highly leveraged tax increment financing districts; and government-wide reserves that, while adequate for a typical municipality, are insubstantial relative to the village's outsized long-term obligations.
The A2 rating is further based on the village's large number of non-essential enterprises, balanced by its important role in the regional economy, with its large service and hospitality sector benefiting from a favorable location between the city of Chicago (GO rated A3/negative outlook) and O'Hare International Airport (revenue debt rated A2/negative outlook) and strong access to public transportation.
The negative outlook is based on the potential for the village's enterprise operations to continue to rely and/or increase their reliance on the general fund, as well as additional potential risk posed by the village's recent involvement in new and therefore untested economic development ventures. The negative outlook also incorporates the village's reliance on revenue growth to fund future annual required contributions (ARC) of its safety services pension. Should revenue growth not occur as expected, making the full ARC payments could place additional pressure on the general fund.
